Growth & SaaS
Customer churn rate
Customer churn rate is the share of customers at the start of a period who cancel or stop paying during it.
Churn rate = Customers lost in the period ÷ Customers at the start of the period
Worked example
| Customers at the start of the month | 400 |
| Customers who cancelled during the month | 12 |
| New customers won during the month | 30 (not counted) |
12 ÷ 400 = 3.0% monthly customer churn
Why it matters
Churn sets a ceiling on growth: every customer lost has to be replaced before the business grows at all. It also drives lifetime value, so small changes in churn move what you can afford to spend on acquisition.
Common mistakes
Where it misleads
Adding new customers to the denominator, which makes churn look lower in a month with strong sales.
Multiplying monthly churn by 12: 3% a month compounds to about 31% a year, not 36%.
Reporting only customer churn when revenue churn differs, for example when the customers leaving are the largest.
Related terms
Keep reading
- Net revenue retention (NRR)Net revenue retention is the share of recurring revenue from existing customers that a business keeps over a period, after upgrades, downgrades and cancellations.
- Customer lifetime value (LTV)Customer lifetime value is the gross profit a business expects to earn from an average customer over the whole time they stay.
- Monthly recurring revenue (MRR)Monthly recurring revenue is the predictable subscription revenue a business expects to bill every month, normalized to a monthly amount.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.